Johannesburg - South Africa has given credit ratings agencies “positive news” in recent meetings, the nation's deputy president said on Sunday after announcing a proposal for a national minimum wage.
South Africa faces a possible downgrade to sub-investment grade by ratings agencies next month, with often violent strikes by labour unions over wages a major concern among investors.
A government advisory panel on Sunday suggested a national minimum wage of R3 500 per month, around R20 an hour.
“We have made tremendous progress on the labour instability issues,” Cyril Ramaphosa said, referring to his discussions with ratings agencies.
Around 47 percent of South Africa's workers earn less than R3 500 per month, Ramaphosa said, adding that he hopes labour unions, government and businesses conclude an agreement before the end of the year.
“Now there is a figure on the table, around which there can be meaningful discussions,” he said.
Wages and salaries are politically sensitive in South Africa, where the official unemployment rate is close to 25 percent and inequality remains glaring more than 20 years after the end of apartheid.
Supporters of a minimum wage say it can stimulate growth as workers can spend more while reducing inequality. Critics say it could lead to increased unemployment as employers will be unable to afford higher wage bills.
Moody's rates South Africa two notches above subinvestment grade, with a negative outlook, while Fitch and S&P Global Ratings have it just a step above “junk”.
REUTERS